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Artificial intelligence (AI) has emerged as a formidable force in the tech space over recent years. Quantum computing has the potential to keep pace with, and even supplement, AI’s expansion, given that AI platforms require more rapid computation speeds to reconcile with increasing demand.
With McKinsey forecasting that the quantum computing market could reach $80 billion by 2035 or 2040, it’s worth considering the prospects for two quantum computing companies, D-Wave Quantum Inc. (QBTS) and IonQ, Inc. (IONQ), which are relentlessly pushing the boundaries in this innovative technological sphere and could be instrumental in shaping the future trajectory of the industry.
Here's a closer look at these two to determine which stock has more upside potential.
The Case for D-Wave Quantum Stock
Founded in 1999, Canada-based D-Wave Quantum Inc. (QBTS) develops and delivers quantum computing systems, software, and professional services for developers and enterprises worldwide. It has successfully built several quantum annealers with over 5,000 qubits, which allows greater potential for commercial applications. Its market cap currently stands at $311.9 million.
Shares of QBTS have soared a whopping 309% over the past 52 weeks, substantially outperforming the S&P 500 Index's ($SPX) 32.1% increase.
Priced at 36.72 times sales, D-Wave trades at a more than 900% premium to its tech industry peers.
QBTS Rallies Ahead of Earnings
QBTS’ Q3 revenue rose 51.2% annually to $2.6 billion, with a 62% year-over-year increase in commercial revenue. Bookings for the quarter surged 53% from the prior-year quarter to $2.9 million. Another excellent metric was its increasing average deal size (or customer spend), which increased by 172% and 178% for commercial and all customers, respectively.
Moreover, as AI growth accelerates, its energy needs increase. Quantum computing promises to reduce this demand, and D-Wave's 2000-qubit system is 100 times more power-efficient than traditional counterparts.
Last month, D-Wave included its “most performant” 1,200+ Qubit Advantage2 prototype in its Leap quantum cloud service. Available for Leap subscription customers, it is expected to produce “significant performance gains on hard optimization problems.”
D-Wave will unveil its Q4 and fiscal year 2023 earnings report ahead of the opening bell this Thursday, Mar. 28. Wall Street analysts project its revenue to increase over 95% year-over-year to $4.70 million, while the loss per share is anticipated to narrow to $0.10 in the fourth quarter. The stock surged 7.69% in Wednesday’s session, pointing to potentially high expectations for the earnings report.
QBTS has a unanimous “Strong Buy” rating from all four analysts in coverage. However, the group also shares a consensus price target of $2.00, which represents a discount of 4.7% to Wednesday’s close.
The Case for IonQ Stock
Headquartered in College Park, Maryland, IonQ, Inc. (IONQ) develops general-purpose quantum computing systems in the U.S. It offers access to quantum computers of varying qubit capacities through cloud platforms like Amazon (AMZN) Web Services (AWS), Amazon Braket, Microsoft's (MSFT) Azure Quantum, Google's (GOOGL) Cloud Marketplace, and its cloud service. Additionally, it provides hardware development, maintenance, support, and consulting services. Its market cap currently stands at $1.89 billion.
On Oct. 1, 2021, IonQ began trading on the New York Stock Exchange, becoming the world's first public pure-play quantum computing company. At a $10.00 per share pricing, IonQ raised over $600 million in funding via its SPAC listing. Despite initial peaks, with a market cap exceeding $5 billion by late 2021, the stock has experienced notable volatility, and now trades below its merger price.
IONQ shares returned 86.5% over the past 52 weeks - lagging the returns of penny stock QBTS, but surpassing the SPX’s gains.
Priced at 90.22 times sales, IonQ is valued at a 145.7% premium to D-Wave.
IonQ Grapples with Widening Losses
IonQ shares were volatile after the company’s late February earnings report, which showed Q4 revenue hitting a stronger-than-forecast $6.1 million. That pushed annual revenue to $22 million, marking 98% growth. It achieved $65.1 million in new bookings during fiscal 2023, above the high end of the full-year financial outlook range.
However, as the firm continues to invest in technology development and the build-out of a new R&D and manufacturing facility near Seattle, IonQ’s Q4 net loss widened to $41.9 million, or $0.20 per share, with an adjusted EBITDA loss of $20 million. The company guided for a steeper full-year EBITDA loss of $110.5 million in 2024, as well.
For 2024, IonQ expects revenue to range between $37 million and $41 million, while bookings are anticipated to be between $70 million and $90 million.
Despite the forecast for widening losses, IONQ has a consensus “Moderate Buy” rating on Wall Street. Out of the six analysts covering IONQ, two recommend “Strong Buy,” one suggests “Moderate Buy,” and three say “Hold.”
IonQ's average analyst price target of $16.50 indicates a potential upside of 81.1% over the next year. The Street-high price target of $21 suggests the stock could rally as much as 130.5% from current levels.
